04 Dec How income impacts Social Securityblondieb38/morguefile.com
Q. I just started collecting Social Security two months ago at 64 1/2, which of course is not full retirement age. I have worked in 2017 from Jan. 1 to April 15, and then collected unemployment from April 15 to October 15. When I worked I took home $700 per week, while unemployment was $600 per week. I also started selling used auto parts I’ve collected over the years through eBay with PayPal for maybe $8,000. PayPal says that when you hit $20,000, you have to fill out a 1099. Will the sale of these auto parts affect my Social Security benefits?
A. Income is income, and the IRS isn’t exactly lax when it comes to reporting responsibilities.
The Internal Revenue Code puts the burden on all taxpayers to report all income received no matter how small and regardless of whether or not you received a 1099, said Vince Pallitto, a certified financial planner and certified public accountant with Summit Asset Management in Florham Park.
He said it sounds like you are selling auto parts that you collected over time as a hobby, and it does not sound like you are holding yourself out to be in the auto parts business.
This is important for two reasons: Social Security and New Jersey state sales tax.
“If you are in the trade or business of buying and reselling auto parts, it would adversely affect your Social Security because you are not retired prior to full retirement age and may have to pay back a portion of the Social Security income,” Pallitto said.
But even more important: if this activity does not qualify as a hobby, you may be responsible for sales tax on the items sold, he said.
Based on what you wrote, the parts you sold must have a cost that can be matched against the sales on Form Schedule C.
Pallitto said it seems like your net income will be less than the $16,920 of allowable earned income that you can earn before you would have to repay Social Security.
“This is not administered by the IRS but rather the Social Security Administration,” Pallitto said. “When you applied for Social Security, you probably disclosed all of your earnings and unemployment you received to date. Therefore that earnings do not count toward the $16,920 exclusion.”
It would make sense for you to meet with a professional who can examine the specifics of your situation.
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This post was first published in December 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.